Did Florida's residential electricity exemption apply to timeshare units, master meters, and short-term occupants?

Plain-English summary

Florida allowed the residential electricity exemption for timeshare units used solely as temporary or permanent residences. The management companies bought electricity on behalf of owners, and occupants could stay as owners, guests, lessees, or transient renters, but could not operate a business or other commercial activity in the units.

The exemption did not depend on residential utility rates or individual meters. Master-metered service on commercial-style rates could still qualify if every use on the meter was residential. But any nonexempt commercial use made the entire metered sale taxable unless that use was separately metered.

Resident-only common areas could also qualify. The ruling addressed lighting, elevators, climate control, pools, recreational facilities, and clubhouse areas restricted to owners, tenants, and their guests and not held out to the public.

What this means for you

Timeshare and condominium managers should document actual residential use, access restrictions, and separate metering for public or commercial areas. The utility's rate label alone did not decide the exemption.

Common questions

Q: Did short-term rental use defeat the exemption?
A: No, if the occupant used the unit only as a temporary residence.

Q: Did a master meter defeat the exemption?
A: No.

Q: What happened if a commercial use shared the meter?
A: The entire sale became taxable unless the nonexempt use was separately metered.

Citations and references

• Fla. Stat. § 212.05(1)(e) — tax on electrical power
• Fla. Stat. § 212.08(7)(j) — residential household utilities
• Fla. Admin. Code r. 12A-1.053 — residential electric-power treatment
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-019

Original ruling text

SUMMARY

QUESTION: Under the specific fact pattern described below,
are Company A and Company B exempt from the payment of
sales tax for the electricity purchased for the owners
pursuant to section 212.08(7)(j), F.S.?

ANSWER - Based on the Facts Below: To the extent that
electricity supplied to each unit is used for residential
household purposes, the exemption would apply.

QUESTION: Does the fact that some of the timeshare resorts
are serviced by the utility through master meters on GSD or
LD rates, and others are provided service on individual
meters at residential rates, have any bearing on the
taxability of the electricity under section 212.08(7)(j),
F.S.?

ANSWER - Based on the Facts Below: The exemption would
remain applicable regardless of what rate is charged by the
utility, so long as the electricity is being used solely
for residential purposes. Any type of commercial activity
on the property, unless separately metered, would negate
the application of the exemption and make the entire sale
taxable.

QUESTION: Does the fact that some of the units are used for
short-term or transient rentals have any bearing on the
taxability of the electricity under section 212.08(7)(j),
F.S.?

ANSWER - Based on the Facts Below: No. As long as the
occupant is using the household exclusively for residential
purposes, the exemption would apply to short-term or
transient rentals. The occupant must make the household
his or her residence, temporary or permanent, and engage in
no other use than residential.

Apr 25, 2003

Subject: Technical Assistance Advisement 03A-019
XXX (Company A)
FEI No.: XX
XXX (Company B)
FEI No.: XX
Electricity Used at Timeshares
Sales and Use Tax
Sections 212.05, 212.08, F.S.
Rule 12A-1.053, F.A.C.

Dear :

This response is in reply to your petition received February 26,
2003, requesting the Department's issuance of a Technical
Assistance Advisement pursuant to s. 213.22, F.S., and Chapter
12-11, F.A.C., regarding the above referenced matter and
parties. An examination of your petition has established that
you have complied with the statutory and regulatory requirements
for issuance of a TAA. Therefore, the Department is hereby
granting your request for issuance of a TAA.

ISSUES

Under the specific fact pattern described below, are
Company A and Company B exempt from the payment of sales
tax for the electricity purchased for the owners pursuant
to section 212.08(7)(j), F.S.?

Does the fact that some of the timeshare resorts are
serviced by the utility through master meters on GSD or LD
rates, and others are provided service on individual meters
at residential rates, have any bearing on the taxability of
the electricity under section 212.08(7)(j), F.S.?

Does the fact that some of the units are used for shortterm or transient rentals have any bearing on the
taxability of the electricity under section 212.08(7)(j),
F.S.?

FACTS

Company A and Company B manage Resort A and Resort B, which are
multiple timeshare developments located in Florida. Each
timeshare has formed an Association that operates in a similar
fashion. The owners are all owners of timeshare interests or
fee simple interests in units in the condominiums. Company A
and Company B have entered into contractual agreements to
operate and manage the Resort A and Resort B properties. In
accordance with their agreement to manage and operate the resort
timeshare properties, Company B and Company A purchase
electricity for use by the occupants of each timeshare unit and
the use of the common elements. Each timeshare interest owner
pays his or her share of the total amount of electricity
purchased as part of the assessments made against his or her
timeshare interest, which share is determined by the timeshare
interest's appurtenant percentage ownership in the timeshare
resort and common elements.

The occupancy units at the timeshare resorts are used for both
owner occupancy and transient rentals. For the purposes of
section 212.08(7)(j), F.S., the occupants make the unit their
residence on a temporary basis and engage in no use other than
residential. The documents provide that the owner of a unit
shall occupy his unit as a single family private dwelling for
himself, members of his family, his social guests, lessees,
licensees, and invitees. Transient rentals are permitted;
however, the owner, tenant, or guest occupying the unit is not
permitted to use the unit for operation of a business, trade, or
other commercial activity.

The Resorts consist of multiple buildings containing individual
units and common elements. The electricity provided for use at
each Resort is provided by the power company through different
types of metering. In some buildings, the electric service is
provided through master meters, which include electric service
for multiple units and some of the common elements. In other
buildings the electric service is provided through individual
meters for the occupancy units and master meters for the common
areas. The rates provided for use at each of the Resorts, as
provided by the utility, may vary with the type of service

provided; i.e., master meters in general are serviced on GSD or
LD rates, while individual meters are provided service on
residential rates.

The service for electricity provided to all of the resorts is in
the name of the management company. All monthly electric bills
are received and paid by Company A and/or Company B on behalf of
the timeshare owners. The electricity used in the individual
units and the common areas is used solely for the daily living
needs of the occupants. The use of the common elements for all
non-commercial areas is restricted to owners, tenants, and
invitees of the owners or tenants in residence. There is no
charge for the use of any non-commercial common elements, and
the common elements are not held out for use by the general
public. Any common elements that are used for the general
public, or for any commercial purpose, shall be separately
metered for the electricity provided to such area. Electricity
usage for common areas includes: security lighting, hallway
lighting, landscape lighting, elevators, common element air
conditioning and heating, coin operated washers and dryers, game
machines, snack machines, and soft drink machines, pools, pool
pumps, irrigation systems, recreational facilities, and club
house facilities.

DOCUMENTS PROVIDED BY TAXPAYER

Declaration of Condominium, Articles of Incorporation, and
Bylaws of Company B.

Sample contracts for Company B and Company A.

Copies of one month's electric billing for each resort.

TAXPAYER POSITION

Taxpayer asserts that the length of residence in a unit, or type
of unit, is not relevant in determining whether the exemption
applies; and as long as the unit is used for residential
purposes, the exemption would apply. Taxpayer also asserts that
electricity used in common areas, as long as they are for the
exclusive use of the residents, and not held out for use by the

public, are entitled to the exemption.

APPLICABLE STATUTES AND RULES

Section 212.05(1)(e)1.c., F.S., imposes a sales tax on charges
for electrical power or Energy at the rate of 7 percent.

Subsection 212.08(7)(j), F.S., provides:

Household fuels.--Also exempt from payment of the tax
imposed by this chapter are sales of utilities to
residential households or owners of residential models in
this state by utility companies who pay the gross receipts
tax imposed under s. 203.01, and sales of fuel to
residential households or owners of residential models,
including oil, kerosene, liquefied petroleum gas, coal,
wood, and other fuel products used in the household or
residential model for the purposes of heating, cooking,
lighting, and refrigeration, regardless of whether such
sales of utilities and fuels are separately metered and
billed direct to the residents or are metered and billed to
the landlord. If any part of the utility or fuel is used
for a nonexempt purpose, the entire sale is taxable. The
landlord shall provide a separate meter for nonexempt
utility or fuel consumption....

Rule 12A-1.053(1), F.A.C., provides:

(1)(a) The sale of electric power or energy by an electric
utility is taxable. The sale of electric power or energy
for use in residential households, to owners of residential
models, or to licensed family day care homes by utilities
who are required to pay the gross receipts tax imposed by
Chapter 203, F.S., is exempt. Also exempt is electric power
or energy sold by such utilities and used in the common
areas of apartment houses, cooperatives, and condominiums,
in residential facilities enumerated in Chapter 400, F.S.,
and in other residential facilities. However, if any part
of the electric power or energy is used for a non-exempt
purpose, the entire sale is subject to tax.

(b) An electric utility is not obligated to collect and
remit tax on any sale of electric power or energy when:

1. The electric power or energy is sold at a rate based
   on the utility's "residential schedule," under tariffs
   filed by the utility with the Public Service
   Commission; or

2. The utility has on file a writing or document
   evidencing a representation of the utility's customer
   that the electric power or energy is being purchased
   for residential household use, including licensed
   family day care homes and other facilities identified
   in paragraph (a). The writing or document may be a
   customer application or a certificate that identifies
   the customer as purchasing the electric power or
   energy for a residential purpose. A "customer
   application" includes a record of information obtained
   electronically or orally from the customer in the
   ordinary course of business. The electric utility must
   have acted in good faith in accepting the
   representation of the customer.

(c) Tax is due on electric power or energy purchased by a
customer tax exempt for the claimed purposes of residential
household use that does not qualify for such exemption. In
such instances, if the electric utility complies with the
requirements of paragraph (b), the Department will look to
the customer for any applicable tax, penalty, or interest
due. The Department will look to the utility for any
applicable tax, penalty, or interest due when the electric
utility's books and records indicate a failure to comply
with the requirements of paragraph (b).

RESPONSE

Section 212.08 (7) (j), F.S., provides an exemption for the sale
of utilities to "residential households" used for residential
purposes. This paragraph also provides that if any part of the
utility is used for a nonexempt purpose, the entire sale is
taxable. Thus, the statute contains two requirements: (1) the

sale must be to residential households, and (2) there can be no
use for a nonexempt purpose (i.e., the use must be exclusively
for residential purposes). As the intent of the statute is to
provide an exemption to residential households that are using
utilities for residential purposes, the use of the household by
the occupant is critical. The occupant must use the household
exclusively for residential purposes. In other words, he or she
must make the household his or her residence, temporary or
permanent, and engage in no other use than residential.

As the statute places no requirement as to the length of time an
occupant must reside in a household for the exemption to apply,
each condominium unit may qualify as a residential household
despite the fact that the occupant may be residing in the unit
on a temporary basis. To the extent that electricity supplied
to each unit is used for residential household purposes, the
exemption would apply. However, in the event that any such unit
is used for a nonexempt purpose while it is being used on a
temporary basis, such as conducting any type of commercial
business or activity, the exemption would no longer be
applicable.

Additionally, the sale of electric power or energy is exempt
when it is used in the common areas of apartment houses,
cooperatives, and condominiums. To the extent that access to
such common areas of a residential condominium is restricted to
its owners, tenants, and guests, the residential use exemption
provided in section 212.08 (7)(j), F.S., would apply.

Following are your specific questions with answers:

Under the specific fact pattern described above, are
Company A and Company B exempt from the payment of sales
tax for the electric purchased for the owners pursuant to
section 212.08(7)(j), [F.S.]?

To the extent that electricity supplied to each unit is
used for residential household purposes, the exemption
would apply.

Does the fact that some of the timeshare resorts are

serviced by the utility through master meters on GSD or LD
rates, and others are provided service on individual meters
at residential rates, have any bearing on the taxability of
the electric under section 212.08(7)(j), [F.S.]?

The exemption would remain applicable regardless of what
rate is charged by the utility, so long as the electricity
is being used solely for residential purposes. Any type of
commercial activity on the property, unless separately
metered, would negate the application of the exemption and
make the entire sale taxable.

Does the fact that some of the units are used for shortterm or transient rentals have any bearing on the
taxability of the electric under section 212.08(7)(j),
F.S.?

No. As long as the occupant is using the household
exclusively for residential purposes, the exemption would
apply to short-term or transient rentals. The occupant
must make the household his or her residence, temporary or
permanent, and engage in no other use than residential.

This response constitutes a Technical Assistance Advisement
under Section 213.22, F.S., which is binding on the Department
only under the facts and circumstances described in the request
for this advice as specified in Section 213.22, F.S. Our
response is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or
administrative rule changes, or judicial interpretations of the
statutes or rules, upon which this advise is based, may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s.213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,

the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Kelley A. Cramer
Attorney
Technical Assistance and Dispute Resolution
(850) 922-4835

KC/
Ctrl# 54025
Enclosure